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CHANNEL LINES


A Breakout For Honeywell International

02/07/05 09:41:51 AM
by Kevin Hopson

A trading range breakout could spell higher prices for Honeywell.

Security:   HON
Position:   N/A

I touched on Honeywell International (HON) a couple of times last month. For example, I said in early January that investors should continue to hold shares of Honeywell, as a confluence of support in the $33.60 to $33.80 range would possibly act as a reversal point for the stock. This was the site of the blue median line and the 61.8% retracement level from the October-November rally. As expected, prices bounced off support here and proceeded to rally. A week later, I touched on Honeywell again, as the stock was coming up on resistance.

Fortunately for shareholders, Honeywell overcame these resistance levels and has now broken out of a bullish consolidation pattern. For example, note how prices broke out of the blue pitchfork last week, moving above the top parallel line and the red warning line in the process. In addition, Honeywell recently breached a triple top at the $36.80 level, effectively breaking out of a three-month trading range in the process.

Figure 1: HON. Honeywell overcame resistance levels and has broken out of a bullish consolidation pattern. Note how prices broke out of the blue pitchfork last week, moving above the top parallel line and the red warning line in the process. In addition, Honeywell recently breached a triple top at the $36.80 level, effectively breaking out of a three-month trading range in the process.
Graphic provided by: StockCharts.com.
 
Though the top parallel line of the black pitchfork could act as resistance in the near term, the stock should eventually make its way up to the $42.00 to $44.60 range. I calculated this target by taking the number of times that prices tested the top channel line in alternate sequence before breaking out (3), multiplying this by the width of the trading range ($36.80-$34.20=$2.60) and then adding this figure ($2.60*3=$7.80) to the bottom channel line ($34.20+$7.80=$42.00) and top channel line ($36.80+$7.80=$44.60).



Kevin Hopson

Kevin has been a technical analyst for roughly 10 years now. Previously, Kevin owned his own business and acted as a registered investment advisor, specializing in energy. He was also a freelance oil analyst for Orient Trading Co., a commodity futures trading firm in Japan. Kevin is currently a freelance writer.

Glen Allen, VA
E-mail address: hopson_1@yahoo.com

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